DALLAS, July 24, 2013 (GLOBE NEWSWIRE) -- Texas Capital Bancshares, Inc. (Nasdaq:TCBI), the parent company of Texas Capital Bank, announced earnings and operating results for the second quarter of 2013.

Net income decreased 27% on a linked quarter basis and decreased 19% from the second quarter of 2012 (12% decrease on a linked quarter basis and 2% decrease from the second quarter of 2012 excluding charge related to organizational change)

EPS decreased 35% on a linked quarter basis and 32% from the second quarter of 2012 (20% decrease on a linked quarter basis and 16% decrease from the second quarter of 2012 excluding charge related to organizational change)

Demand deposits increased 11% and total deposits increased 3% on a linked quarter basis; grew 45% and 20%, respectively, from the second quarter of 2012

Loans held for investment increased 9% and total loans increased 9% on a linked quarter basis; both grew 20% from the second quarter of 2012, resulting in a significant increase in the provision

"We are very pleased with the extraordinary growth in loans held for investment, the substantial growth in demand deposits and continued strong core earnings," said George Jones, CEO. "They are the basis on which we are building the potential for a very positive future in earnings and shareholder returns."

Texas Capital Bancshares, Inc. reported net income from continuing operations of $24.1 million and net income available to common shareholders of $21.6 million for the quarter ended June 30, 2013, compared to $29.6 million for both net income from continuing operations and net income available to common shareholders for the second quarter of 2012. On a fully diluted basis, earnings per common share from continuing operations were $.52 for the three months ended June 30, 2013, compared to $.76 for the same period last year. The three months ended June 30, 2013, includes the first full quarter of preferred stock dividends which is approximately $.06 per share. The discussion below relates only to continuing operations.

Return on average common equity was 9.94 percent and return on average assets was .95 percent for the second quarter of 2013, compared to 18.08 percent and 1.40 percent, respectively, for the second quarter of 2012.

Net interest income was $101.2 million for the second quarter of 2013, compared to $98.0 million in the first quarter of 2013 and $90.6 million for the second quarter of 2012. The net interest margin in the second quarter of 2013 was 4.19 percent, a 30 basis point decrease from the second quarter of 2012 and an 8 basis point decrease from the first quarter of 2013. The year over year decrease in net interest margin is due to the growth in loans with lower yields offset with a reduction in the total cost of deposits and borrowed funds. Compared to the second quarter of 2012, the issuance in subordinated capital notes during September 2012 had a 7 basis point impact on the net interest margin. The year over year growth in loans more than compensated for the reduction in yields and produced strong growth in net interest income.

Average loans held for investment for the second quarter of 2013 were $7.1 billion, an increase of $1.2 billion from the second quarter of 2012 and $309.6 million from the first quarter of 2013. Average loans held for sale for the second quarter of 2013 increased $343.8 million compared to the second quarter of 2012 and increased $43.6 million from the first quarter of 2013.

Average total deposits for the second quarter of 2013 increased by $1.8 billion from the second quarter of 2012 and increased by $525.8 million from the first quarter of 2013. For the same periods, the average balance of demand deposits increased by $1.0 billion, or 56 percent, to $2.9 billion from $1.9 billion during the second quarter of 2012 and increased $384.4 million from the first quarter of 2013.

In the second quarter of 2013, we experienced continued decreases in levels of non-performing assets. Credit costs, including the provision for credit losses and valuation charges related to other real estate owned ("OREO") totaled $7.4 million in the second quarter of 2013 compared to $4.1 million in the second quarter of 2012 and $2.1 million in the first quarter of 2013. We recorded a $7.0 million provision for credit losses in the second quarter of 2013 compared to $1.0 million in the second quarter of 2012 and $2.0 million in the first quarter of 2013. The substantial majority of the provision in the second quarter of 2013 was directly related to the significant growth in loans held for investment during the quarter. Due to growth and improving credit quality, at June 30, 2013, the combined reserve decreased to 1.11 percent of loans held for investment as compared to 1.21 percent at June 30, 2012 and 1.14 percent at March 31, 2013. In management's opinion, the reserve is appropriate and is derived from consistent application of the methodology for establishing the adequacy of reserves for Texas Capital Bank's loan portfolio. In the second quarter of 2013, net charge-offs were $2.4 million, compared to net charge-offs of $533,000 in the second quarter of 2012 and net charge-offs of $1.2 million in the first quarter of 2013. For the first half of 2013, the net charge-off ratio was 10 basis points compared to 5 basis points for the same period in 2012. Non-accrual loans were $38.5 million, or .51 percent of loans held for investment at the end of the second quarter of 2013, $56.4 million, or .91 percent, at the end of the second quarter of 2012 and $43.4 million, or .63 percent, at the end of the first quarter 2013. At June 30, 2013, total OREO was $13.1 million compared to $27.9 million at the end of the second quarter of 2012, and $14.4 million at the end of the first quarter of 2013. The OREO balance of $13.1 million at June 30, 2013, is stated net of a $4.6 million valuation allowance. The valuation charge for OREO reflected in non-interest expense was $383,000 in the second quarter of 2013 compared to $3.1 million in the second quarter of 2012 and $71,000 in the first quarter of 2013.

Non-interest income increased $666,000 during the second quarter of 2013, or 6 percent, compared to the same period of 2012 primarily related to a $650,000 increase in brokered loan fees earned in the mortgage finance division. Swap fee income increased $359,000 during the second quarter of 2013 due to an increase in swap transactions as compared to the same period in 2012. Offsetting these increases was a $380,000 decrease in other non-interest income during the second quarter of 2013 as compared to the same period in 2012.

Non-interest expense for the second quarter of 2013 increased $14.7 million, or 27 percent, to $68.7 million from $54.0 million in the second quarter of 2012. The increase is primarily related to a $15.0 million increase in salaries and employee benefits to $45.2 million from $30.2 million. Of the $15.0 million increase, approximately $7.7 million related to a charge taken to reflect the financial effect of the organizational change announced during the second quarter of 2013 and includes assumptions about future payouts that may or may not happen, but are required to be estimated at the time of the event. Additionally, there was another $2.2 million of charges related to the increased probability that certain company financial performance targets for executive cash-based incentives will be met. These incentives are expensed based on current stock prices. The remaining $5.1 million increase from the second quarter of 2012 was primarily due to general business growth and costs of cash-based incentives resulting from the increase in stock price. Marketing expense increased $900,000 from the second quarter of 2012 due to expansion of customer bases in both loans and deposits. Legal and professional expense increased $1.4 million from the second quarter of 2012 due to general business growth. Allowance and other carrying costs for OREO expense decreased $3.3 million to $482,000, which included a $383,000 valuation expense. The $383,000 valuation expense in the second quarter of 2013 includes $219,000 related to direct write-downs of the OREO balance and $164,000 related to increasing the valuation allowance for the second quarter of 2013, compared to $423,000 related to direct write-downs and $2.7 million related to increasing the valuation allowance for the second quarter of 2012.

Stockholders' equity increased 52 percent from $680.7 million at June 30, 2012 to $1.0 billion at June 30, 2013, primarily related to the offering of 2.3 million common shares for net proceeds of $87 million in the third quarter of 2012, the offering of 6.0 million shares of preferred shares for proceeds of $145.1 million in the first quarter of 2013 and retained net income. The Bank is well capitalized under regulatory guidelines and at June 30, 2013, the Company's ratio of tangible common equity to total tangible assets was 7.9 percent.

ABOUT TEXAS CAPITAL BANCSHARES, INC.

Texas Capital Bancshares, Inc. (Nasdaq:TCBI) is the parent company of Texas Capital Bank, a commercial bank that delivers highly personalized financial services to businesses and individuals. Headquartered in Dallas, the Bank has full-service locations in Austin, Dallas, Fort Worth, Houston and San Antonio.

This release contains forward-looking statements, which are subject to risks and uncertainties. A number of factors, many of which are beyond Texas Capital Bancshares' control, could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These risks and uncertainties include the risk of adverse impacts from general economic conditions, competition, interest rate sensitivity and exposure to regulatory and legislative changes. These and other factors that could cause results to differ materially from those described in the forward-looking statements can be found in the Form 10-K and other filings made by Texas Capital Bancshares with the Securities and Exchange Commission.

Issued shares – 40,862,898 and 38,114,429 at June 30, 2013 and 2012, respectively

408

381

7%

Additional paid-in capital

445,270

357,713

24%

Retained earnings

437,152

318,490

37%

Treasury stock (shares at cost: 417 at June 30, 2013 and 2012, respectively)

(8)

(8)

–

Accumulated other comprehensive income, net of taxes

2,133

4,129

(48)%

Total stockholders' equity

1,034,955

680,705

52%

Total liabilities and stockholders' equity

$10,978,288

$9,144,748

20%

TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(Dollars in thousands except per share data)

Three Months Ended June 30

Six Months Ended June 30

2013

2012

2013

2012

Interest income

Interest and fees on loans

$106,418

$94,291

$209,600

$186,065

Securities

773

1,203

1,712

2,510

Federal funds sold

13

4

19

5

Deposits in other banks

60

48

112

97

Total interest income

107,264

95,546

211,443

188,677

Interest expense

Deposits

3,228

3,482

6,473

6,954

Federal funds purchased

206

240

418

521

Repurchase agreements

5

4

9

7

Other borrowings

143

492

356

927

Subordinated notes

1,829

–

3,658

–

Trust preferred subordinated debentures

633

688

1,267

1,399

Total interest expense

6,044

4,906

12,181

9,808

Net interest income

101,220

90,640

199,262

178,869

Provision for credit losses

7,000

1,000

9,000

4,000

Net interest income after provision for credit losses

94,220

89,640

190,262

174,869

Non-interest income

Service charges on deposit accounts

1,749

1,624

3,450

3,228

Trust fee income

1,269

1,232

2,510

2,346

Bank owned life insurance (BOLI) income

463

588

961

1,109

Brokered loan fees

4,778

4,128

9,522

7,779

Swap fees

981

622

2,633

1,419

Other

1,888

2,268

3,333

3,771

Total non-interest income

11,128

10,462

22,409

19,652

Non-interest expense

Salaries and employee benefits

45,191

30,230

78,732

59,249

Net occupancy expense

4,135

3,679

7,992

7,283

Marketing

4,074

3,174

8,046

5,997

Legal and professional

4,707

3,330

8,647

7,321

Communications and technology

3,347

2,720

6,469

5,203

Allowance and other carrying costs for OREO

482

3,812

912

7,154

Other

6,798

7,028

13,636

14,042

Total non-interest expense

68,734

53,973

124,434

106,249

Income from continuing operations before income taxes

36,614

46,129

88,237

88,272

Income tax expense

12,542

16,506

31,021

31,568

Income from continuing operations

24,072

29,623

57,216

56,704

Income (loss) from discontinued operations (after-tax)

1

(1)

–

3

Net income

24,073

29,622

57,216

56,707

Preferred stock dividends

2,438

–

2,519

–

Net income available to common shareholders

$21,635

$29,622

$54,697

$56,707

Basic earnings per common share:

Income from continuing operations

$.53

$.78

$1.34

$1.50

Net income

$.53

$.78

$1.34

$1.50

Diluted earnings per common share:

Income from continuing operations

$.52

$.76

$1.31

$1.45

Net income

$.52

$.76

$1.31

$1.45

TEXAS CAPITAL BANCSHARES, INC.

SUMMARY OF LOAN LOSS EXPERIENCE

(Dollars in thousands)

2nd Quarter 2013

1st Quarter 2013

4th Quarter 2012

3rd Quarter 2012

2nd Quarter 2012

Reserve for loan losses:

Beginning balance

$75,000

$74,337

$73,722

$72,404

$71,992

Loans charged-off:

Commercial

2,826

1,648

4,044

1,154

1,048

Real estate – term

26

105

–

284

56

Consumer

26

19

–

49

–

Leases

–

–

34

49

26

Total loans charged-off

2,878

1,772

4,078

1,536

1,130

Recoveries:

Commercial

348

397

350

132

191

Real estate – construction

–

–

–

10

–

Real estate – term

7

8

226

130

348

Consumer

15

30

7

18

3

Leases

140

121

21

16

55

Total recoveries

510

556

604

306

597

Net charge-offs

2,368

1,216

3,474

1,230

533

Provision for loan losses

6,796

1,879

4,089

2,548

945

Ending balance

$79,428

$75,000

$74,337

$73,722

$72,404

Reserve for off-balance sheet credit losses:

Beginning balance

$3,976

$3,855

$3,444

$2,992

$2,937

Provision for off-balance sheet credit losses

204

121

411

452

55

Ending balance

$4,180

$3,976

$3,855

$3,444

$2,992

Total reserves for credit losses

$83,608

$78,976

$78,192

$77,166

$75,396

Total provision for credit losses

$7,000

$2,000

$4,500

$3,000

$1,000

Reserve to loans held for investment(2)

1.06%

1.08%

1.10%

1.13%

1.16%

Reserve to average loans held for investment(2)

1.11%

1.10%

1.12%

1.16%

1.22%

Net charge-offs to average loans(1)(2)

.13%

.07%

.21%

.08%

.04%

Net charge-offs to average loans for last twelve months(1)(2)

.12%

.10%

.10%

.10%

.20%

Total provision for credit losses to average loans(1)(2)

.39%

.12%

.27%

.19%

.07%

Combined reserves for credit losses to loans held for investment(2)

1.11%

1.14%

1.15%

1.18%

1.21%

Non-performing assets (NPAs):

Non-accrual loans

$38,450

$43,424

$55,833

$57,275

$56,433

Other real estate owned (OREO) (4)

13,053

14,426

15,991

19,079

27,882

Total

$51,503

$57,850

$71,824

$76,354

$84,315

Non-accrual loans to loans(2)

.51%

.63%

.82%

.87%

.91%

Total NPAs to loans plus OREO(2)

.68%

.83%

1.06%

1.16%

1.35%

Total NPAs to earning assets

.49%

.60%

.71%

.81%

.97%

Reserve for loan losses to non-accrual loans

2.1x

1.7x

1.3x

1.3x

1.3x

Restructured loans

$4,765

$11,755

$10,407

$9,145

$13,943

Loans past due 90 days and still accruing(3)

$7,633

$12,614

$3,674

$3,622

$4,421

Loans past due 90 days to loans(2)

.10%

.18%

.05%

.06%

.07%

(1) Interim period ratios are annualized.

(2) Excludes loans held for sale.

(3) At June 30, 2013, loans past due 90 days and still accruing includes premium finance loans of $4.2 million. These loans are primarily secured by obligations of insurance carriers to refund premiums on cancelled insurance policies. The refund of premiums from the insurance carriers can take 180 days or longer from the cancellation date.

(4) At June 30, 2013, OREO balance is net of $4.6 million valuation allowance.

TEXAS CAPITAL BANCSHARES, INC.

CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

(Dollars in thousands)

2nd Quarter 2013

1st Quarter 2013

4th Quarter 2012

3rd Quarter 2012

2nd Quarter 2012

Interest income

Interest and fees on loans

$106,418

$103,182

$106,653

$100,830

$94,291

Securities

773

939

1,053

1,125

1,203

Federal funds sold

13

6

6

2

4

Deposits in other banks

60

52

57

54

48

Total interest income

107,264

104,179

107,769

102,011

95,546

Interest expense

Deposits

3,228

3,245

3,312

3,378

3,482

Federal funds purchased

206

212

190

268

240

Repurchase agreements

5

4

3

3

4

Other borrowings

143

213

615

607

492

Subordinated notes

1,829

1,829

1,829

208

–

Trust preferred subordinated debentures

633

634

665

692

688

Total interest expense

6,044

6,137

6,614

5,156

4,906

Net interest income

101,220

98,042

101,155

96,855

90,640

Provision for credit losses

7,000

2,000

4,500

3,000

1,000

Net interest income after provision for credit losses

94,220

96,042

96,655

93,855

89,640

Non-interest income

Service charges on deposit accounts

1,749

1,701

1,693

1,684

1,624

Trust fee income

1,269

1,241

1,260

1,216

1,232

Bank owned life insurance (BOLI) income

463

498

510

549

588

Brokered loan fees

4,778

4,744

4,978

4,839

4,128

Swap fees

981

1,652

2,093

1,397

622

Other

1,888

1,445

2,302

867

2,268

Total non-interest income

11,128

11,281

12,836

10,552

10,462

Non-interest expense

Salaries and employee benefits

45,191

33,541

31,198

31,009

30,230

Net occupancy expense

4,135

3,857

3,916

3,653

3,679

Marketing

4,074

3,972

3,980

3,472

3,174

Legal and professional

4,707

3,940

5,320

4,916

3,330

Communications and technology

3,347

3,122

3,070

2,885

2,720

Allowance and other carrying costs for OREO

482

430

1,369

552

3,812

Litigation settlement expense

–

–

4,000

–

–

Other

6,798

6,838

7,221

7,034

7,028

Total non-interest expense

68,734

55,700

60,074

53,521

53,973

Income from continuing operations before income taxes

36,614

51,623

49,417

50,886

46,129

Income tax expense

12,542

18,479

17,982

18,316

16,506

Income from continuing operations

24,072

33,144

31,435

32,570

29,623

Income (loss) from discontinued operations (after-tax)

1

(1)

(6)

(34)

(1)

Net income

24,073

33,143

31,429

32,536

29,622

Preferred stock dividends

2,438

81

–

–

–

Net income available to common shareholders

$21,635

$33,062

$31,429

$32,536

$29,622

TEXAS CAPITAL BANCSHARES, INC.

QUARTERLY FINANCIAL SUMMARY – UNAUDITED

Consolidated Daily Average Balances, Average Yields and Rates

Continuing Operations

(Dollars in thousands)

2nd Quarter 2013

1st Quarter 2013

4th Quarter 2012

3rd Quarter 2012

2nd Quarter 2012

Average Balance

Revenue/ Expense (1)

Yield/ Rate

Average Balance

Revenue/ Expense (1)

Yield/ Rate

Average Balance

Revenue/ Expense (1)

Yield/ Rate

Average Balance

Revenue/ Expense (1)

Yield/ Rate

Average Balance

Revenue/ Expense (1)

Yield/ Rate

Assets

Securities – Taxable

$60,063

$594

3.97%

$71,220

$729

4.15%

$78,182

$811

4.13%

$84,583

$881

4.14%

$91,623

$948

4.16%

Securities – Non-taxable(2)

18,843

275

5.85%

22,174

323

5.91%

25,301

372

5.85%

25,717

376

5.82%

26,817

393

5.89%

Federal funds sold and securities purchased under resale agreements

54,448

13

0.10%

24,785

6

0.10%

21,617

6

0.11%

9,360

2

0.09%

8,077

4

0.20%

Deposits in other banks

91,177

60

0.26%

78,718

52

0.27%

69,886

57

0.32%

64,859

54

0.33%

60,416

48

0.32%

Loans held for sale

2,406,246

22,440

3.74%

2,362,646

22,641

3.89%

2,658,092

26,440

3.96%

2,432,027

24,433

4.00%

2,062,449

21,087

4.11%

Loans held for investment

7,152,323

83,978

4.71%

6,842,766

80,541

4.77%

6,662,817

80,213

4.79%

6,313,263

76,397

4.81%

5,950,913

73,204

4.95%

Less reserve for loan losses

75,006

–

–

74,442

–

–

73,912

–

–

72,373

–

–

71,779

–

–

Loans, net of reserve

9,483,563

106,418

4.50%

9,130,970

103,182

4.58%

9,246,997

106,653

4.59%

8,672,917

100,830

4.63%

7,941,583

94,291

4.78%

Total earning assets

9,708,094

107,360

4.44%

9,327,867

104,292

4.53%

9,441,983

107,899

4.55%

8,857,436

102,143

4.59%

8,128,516

95,684

4.73%

Cash and other assets

402,898

401,692

427,299

399,428

394,086

Total assets

$10,110,992

$9,729,559

$9,869,282

$9,256,864

$8,522,602

Liabilities and Stockholders' Equity

Transaction deposits

$1,051,199

$233

0.09%

$1,003,735

$253

0.10%

$941,947

$244

0.10%

$803,776

$247

0.12%

$694,463

$198

0.11%

Savings deposits

3,340,420

2,292

0.28%

3,246,675

2,297

0.29%

2,933,904

2,299

0.31%

2,922,852

2,185

0.30%

2,664,598

2,107

0.32%

Time deposits

397,868

407

0.41%

403,113

414

0.42%

423,685

448

0.42%

491,783

576

0.47%

584,581

831

0.57%

Deposits in foreign branches

340,713

296

0.35%

335,265

281

0.34%

362,580

321

0.35%

431,412

370

0.34%

444,478

346

0.31%

Total interest bearing deposits

5,130,200

3,228

0.25%

4,988,788

3,245

0.26%

4,662,116

3,312

0.28%

4,649,823

3,378

0.29%

4,388,120

3,482

0.32%

Other borrowings

727,158

354

0.20%

1,041,573

429

0.17%

1,725,129

808

0.19%

1,639,953

878

0.21%

1,428,575

736

0.21%

Subordinated notes

111,000

1,829

6.61%

111,000

1,829

6.68%

111,000

1,829

6.56%

12,065

208

6.86%

–

–

–

Trust preferred subordinated debentures

113,406

633

2.24%

113,406

634

2.27%

113,406

665

2.33%

113,406

692

2.43%

113,406

688

2.44%

Total interest bearing liabilities

6,081,764

6,044

0.40%

6,254,767

6,137

0.40%

6,611,651

6,614

0.40%

6,415,247

5,156

0.32%

5,930,101

4,906

0.33%

Demand deposits

2,914,341

2,529,927

2,356,758

2,010,694

1,864,456

Other liabilities

91,608

90,538

86,308

80,810

69,076

Stockholders' equity

1,023,279

854,327

814,565

750,113

658,969

Total liabilities and stockholders' equity

$10,110,992

$9,729,559

$9,869,282

$9,256,864

$8,522,602

Net interest income

$101,316

$98,155

$101,285

$96,987

$90,778

Net interest margin

4.19%

4.27%

4.27%

4.36%

4.49%

(1) The loan averages include loans on which the accrual of interest has been discontinued and are stated net of unearned income.